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09/20/2004 Archived Entry: "Fiscal disaster warning -- from an unexpected source"

THE MOST IMPORTANT THING about this very important article is that it doesn't come from a libertarian think tank or conservative economic institute. The warning is now getting out into the mainstream. Will the rest of us prepare for the looming disaster that both Kerry and Bush refuse to acknowledge?

"Chilling" is the word U.S. Comptroller General David Walker uses to describe the budget outlook.

"The long-term budget projections are just horrifying," added Leonard Burman, co-director of tax policy for the Urban Institute. "I've got four children and it really disturbs me. I just think it's irresponsible what we're doing to them."

What these numbers portend are crippling tax increases on workers, slashed benefits for retirees, gutted budgets for homeland security, highways, research and everything else, and an economic decline or a financial collapse that devastates the middle class, as happened recently in debt-strapped Argentina. Eventually, analysts insist, someone -- today's children or tomorrow's elderly or both -- will pay this debt. ...

The International Monetary Fund estimates the gap at $47 trillion, the Brookings Institution at $60 trillion.

"To give you idea how big the problem is," said Laurence Kotlikoff, economics chairman at Boston University, who has written extensively on the subject, to close a $51 trillion fiscal gap, "you'd have to have an immediate and permanent 78 percent hike in the federal income tax." ...

"It's a number that's so large that people find it implausible, and so they don't think about it," said Alan Auerbach, a UC Berkeley economist who studies the issue and consults for the Kerry campaign. "But it's based simply on the projections we have for Social Security and Medicare. People aren't making these numbers up."

(Thanks AZ.)

Posted by Claire @ 01:07 PM CST

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